Tesla's quarterly profits declined on weakening sales of its automotive and energy-storage businesses, a day after Elon Musk suggested merging the carmaker with Space X. Adjusted net income fell 4 per cent to $1.7bn in the third quarter compared with the year before, slightly above Wall Street's expectations for $1.6bn. Revenue was flat at $28bn, in line with analysts' estimates.
Tesla has suffered from a drop in electric vehicle sales as higher demand in Europe, driven by petrol prices, failed to compensate for the loss of EV incentives in the US under President Donald Trump. The result came after Musk, chief executive, on Tuesday announced Tesla and his rocket company Space X had set up special committees to explore a mega-merger between the two groups with sprawling businesses from rockets, satellites, social media, robots and cars. The combination, if approved by shareholders and regulators, would accelerate Tesla's strategic pivot away from cars to robotics and AI while also strengthening the world's richest man's control over the electric-car maker.
Tesla this month said it delivered 486,532 vehicles in the three months to the end of September, beating analysts' forecasts but falling 2 per cent from the 497,099 in the same period last year. The decline came as the carmaker retired its X SUV and S luxury sedan models in January to focus on AI-powered humanoid "Optimus" robots, self-driving golden "Cybercabs" and an electric "Semi" truck. However, Tesla has thus far only managed a limited robotaxi experiment in a few cities in Texas and California and has not sold any Optimus units.
Capital expenditure more than doubled to $4.7bn in the quarter but came in much lower than expectations of $7.9bn and $1bn less than the previous quarter. Musk has said spending needs to dramatically escalate to compete with its Big Tech rivals that are forecast to spend trillions of dollars on AI in the coming years. Those vast investment needs have also fuelled speculation of a merger with Space X.
Earlier in the week, Tesla released its proxy statement ahead of its annual meeting on December 3. The document revealed that after a fierce, years-long battle over a Delaware court's decision to rescind a $56bn 2018 stock award, Musk's ultimate victory on appeal left him in control of 19.8 per cent of the company's shares. The proxy also showed Musk is yet to achieve any of the milestones in a new historic $1tn pay package.
He needs to increase Tesla's market value to $2tn and hit one of a number of other financial and sales objectives to unlock the first tranche of the stock award, but the shares have fallen 18 per cent this year to give it a value of $1.45tn.
Source: Financial Times Companies · Summarized by HeadlinesBriefing